Asia Stocks Predicted to Fall According to Rates Path

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The Asian stock market is predicted to lower as it is expected to follow Wall Street’s performance in the following days. This prediction is heavily attributed to the Federal Reserve’s tactic in raising rates and the wave of Covid in Beijing following the relaxation of the country’s Covid-zero policy.

The US dollar weakened slightly against other currencies recently, and JPY boosted after the Japanese Prime Minister was reported to consider a more flexible approach to the country’s monetary regime.

S&P 500 and Nasdaq 100 closed lower last Friday, causing Australian shares to open lower. The Fed’s move to continuously increase rates may push the country to a recession in 2023. China’s relaxation of its Covid-zero policy, expected to raise stocks as it would open the country’s economy, brought about a surge in Covid-positive deaths. These two factors caused a ripple across the global economies.

According to investment experts, investors are still apprehensive about the stock market with the Fed’s continued hawkish approach and other central banks. In an interview, former NY Fed president William Dudley said that optimistic markets would only lead to central banks tightening.

JC O’Hara, the chief market technician at MKM Partners, said, “Those who were in the camp of a year-end rally are now second-guessing their investment thesis. The markets may have placed too much faith in Santa Claus and the rally he typically brings.”

But other investors are hopeful. Matt Brill, head of US investment-grade and senior portfolio manager at Invesco, said, “I’m more in the camp of the hike in February, and I think they’ll hike again in March, but that’s probably it. We’re 90%-95% of the way done here. The floor has been set, and the worst is behind us.”

Investors are expected to closely monitor the reported earnings of major companies like FedEx Corp and Nike Inc since they recently reported poor results and would be waiting for these companies’ economic outlook in the following year.

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